You might have noticed that last week, when news hit the wire that Donald Trump had hit an airbase in Syria with 59 Tomahawk missiles, USDJPY and 10Y yields fell with S&P futs.
I for one thought that was it. I thought the reflation trade was dead and buried. Then we got an abysmal NFP print. Nail in the coffin, right?
Not really, as it turned out.
And so, as the dollar and yields look like they’re feeling a bit froggy this morning, consider former FX trader Richard Breslow’s opening salvo for the new trading week.
Via Bloomberg
It’s quite the interesting dynamic we have in the markets today. We had some face-ripping moves last Friday, which are usually taken as definitive statements on where things are headed. Yet the rippees are calling foul rather than uncle. And the rippers can be heard mumbling, “thank you Lord” over and over again instead of claiming theirs a decisive victory.
- You can’t help but marvel at the key-day reversals in one asset class after another — often a powerful sign of a new direction in prices. But the interpretation of technical patterns seems to have morphed from telling us where things are likely headed to letting us know where they are not prepared to be
- Of course, it doesn’t help that we’ve seen all of these levels before. Experienced all of the same emotional swings multiple times. Are leery of when the next pivot or misdirection from some Fed speaker is coming. Don’t you just love it when these great communicators say “some people misconstrued what I said last week?”
- And no one seems willing to concede that their own world view might not be the only credible way to describe the state of things. And so here we are, home, home in the range
- So for now, we have a pretty good sense of the breakout levels that didn’t work last week. Treasury 10-year yields below 2.3% didn’t hold, to put it mildly, but if anything are now even more important. There’s a reason why proficient traders look for definitive closes to prove the point. And others insist on continuing to sell when they ought to be buying
- The S&P 500 continues to respect its 55-day moving average. Lean on it because you won’t have the mettle to stick around for proper support levels. E-mini traders who sold Friday’s lows will be chagrined when they look at the cash chart and see it never got close to breaking down. On the other hand bulls need to see the 21-DMA give way to prove any real upside momentum. It really isn’t asking very much
- Gold broke many a heart last week. For bulls, the 200-DMA is moving lower. Funnily enough, you have the Trump trade to thank for that. Back below $1240 and the recent buyers will wonder whether they’re holding pyrite
- Of all the popular themes, the dollar is looking the best. In fact quite constructive. And during all of Friday’s panicking, it never took the bait.
‘Holding Pyrite’,, Rock On..